As expected, Computer Associates ( CA) shareholders on Wednesday re-electedthe software maker's slate of candidates for its boardof directors. But the margin by which they won was farlower than in past elections, a possible sign ofinvestor discontent over an agreement between ComputerAssociates and Texas billionaire Sam Wyly. In a press release Wednesday, Computer Associatessaid all 11 directors standing for election receivedat least 84% of the votes. Ram Kumar, directorof research at Institutional Shareholders Services,said a 16% vote against the directors, however, is aconsiderable margin. "Fifteen to 16% against is certainly higher thanthe norm for most companies and is considered asignificant vote," said Kumar, who in a report toclients
recommended voting against sevendirectors up for re-election. The reason, ISS said inits report, is because the directors supported whatthe firm characterized as a greenmail payment toWyly's Ranger Governance. The firm was referring to a settlement in whichComputer Associates paid Wyly $10 million in exchangefor his agreement to abandon his second proxy contestagainst CA, to not launch another proxy battle forfive years and to extend a noncompete clause for fiveyears. ISS supported election of the other fourdirectors. A review of past board elections at ComputerAssociates showed the latest results are unusual.Since 1997, the largest percentage of votes against adirector was only 6.4%. That was against CA ChairmanCharles Wang last year, when Wyly launched his firstproxy battle against CA with a slate of four dissidentcandidates. But as Kumar pointed out, controversy has swirled around Computer Associates in recent years, including a pending investigation by the Securities and Exchange Commission and U.S. attorney's office into its accounting practices. The controversy also has centered on a change in the way the company recognizes revenue and stock payments to three company executives in 1998. Even so, excluding the Wang vote last year, the largest percentage of votes against a director in five years was 4.5% against Willem F.P. deVogel in 1999, according to the company's 10-Qfilings. Before the stock compensation controversy, in1997, votes against directors up for electionaccounted for a minuscule 0.2% of ballots cast. Computer Associates spokeswoman Denise DesChenesdeclined to speculate on the results of Wednesday'selection. More detailed results will not beavailable for at least two weeks. Kumar said ISS certainly had no expectation thatthe four directors it opposed would not be elected,given that no other candidates were running againstthem. "It's about sending a message to the board andindependent directors who signed off on the $10million," Kumar said. "Our indication was the companytook it the recommendation seriously and I suspect alot of our clients did," Kumar said. The election brings to eight the total number ofindependent directors on the Computer Associatesboard.